Top analyst Mark Mahaney at RBC Capital is out providing a bullish forecast for Netflix, Inc. (NASDAQ:NFLX), but remains sidelined on eBay Inc (NASDAQ:EBAY). While the analyst still chooses Netflix as his “#1 pick” and lifts his price target following a stellar quarterly beat, he is currently less constructive on eBay before tomorrow’s third-quarter report.
Mark Mahaney has a very good TipRanks score with a 68% success rate and he stands at #5 out of 4,180 on the analyst leaderboard. Mahaney earns 22.1% in his annual returns. When recommending NFLX, Mahaney gains 54.2% in average profits on the stock. However, when suggesting EBAY, Mahaney loses 4.8% in average profits on the stock. Let’s take a closer look:
Yesterday, Netflix delivered a third-quarter earnings beat “across the board,” and as such, shares are soaring 18% today. Mahaney underscores a particularly big win when it comes to number of subscriptions and commends the streaming platform for its “successful new Original Content” that is “bolstering the brand globally.”
In reaction, Mahaney reiterates an Outperform rating on shares of NFLX while boosting the price target from $130 to $150, which represents a 27% increase from where the stock is currently trading.
Netflix posted $2.29 billion in revenue, which slightly topped the Street’s projections. Meanwhile, its GAAP EPS of $0.12 “handily beat” both the Street’s expectation of $0.04 and the analyst’s expectation of $0.05. Mahaney notes that NFLX’s “Quadruple Subs Beat” initiated a 20% “after-market rally,” thanks to 370K in Domestic adds for the third quarter, compared to consensus estimates of 309K, international adds this quarter of 3.2MM, which outclassed the Street’s 2.0MM, solid domestic adds guidance of 1.45MM for the fourth quarter, well over the Street’s 1.27MM, and additionally robust international adds guidance of 3.75MM, reaching over the Street’s 3.3MM.
Netflix surprised many with its positive results, as Mahaney explains, “Expectations were somewhat low following a rocky Q2 where the company missed on Subs. The opposite happened here, with the company unequivocally beating expectations while showing improving fundamentals – the 3rd consecutive quarter of total revenue growth acceleration and a record 36.4% Domestic Contribution Margin.”
The analyst notes, “This was despite worries that the Olympics and the un-grandfathering process from the most recent price increase may have impacted Q3’s results. Netflix clearly benefitted from several blockbuster shows that occurred during the quarter, including the sleeper hit Stranger Things and the second season of the international phenomenon Narcos.”
For now, Mahaney sees potential up to $10 upside in EPS by the year 2020, which implies the prospective chance for NFLX shares to double in just the span of the next three years. As the television experience drastically shifts from Linear TV to Internet TV, Netflix remains the leader by a mile when it comes to subscriptions, and both U.S. and international profitability remain strong, the analyst remains upbeat on the platform’s near-term and long-term prospects.
TipRanks analytics indicate NFLX as a Buy. Based on 34 analysts polled in the last 3 months, 17 rate a Buy on NFLX, 10 maintain a Hold, while 7 issue a Sell. The 12-month price target stands at $106.52, marking a nearly 7% upside from where the shares last closed.
Mahaney cautiously previews ebay’s third quarter, with results expected to be reported tomorrow, October 19th. Ahead of earnings, the analyst reiterates a Sector Perform rating on EBAY with a $31 price target, which represents just under a 4% downside from where the shares last closed.
Upon assessing the situation, the analyst sees consensus projections as “reasonable” but notes greater upside than downside variance as “likely” when glancing at the top-line and bottom-line. Additionally, Mahaney contends that the online auction and e-commerce leader’s fourth quarter updated guidance ranges have high probability to “at least bracket the Street.”
Mahaney opines, “At the margin, we were more constructive following the Q2 print. But our investment opinion is unchanged. The key investor decision remains whether eBay is a Cash Cow, a Cash Cube (as in the melting kind), or potentially recovering Cash Cougar. Our Sector Perform rating is based on the belief that one of the first two is the most likely.”
“While the security breach/Google SEO changes from 2014 were significant factors behind eBay’s fundamentals underperformance, we believe eBay will continue to face increasingly powerful headwinds from competition with Amazon, a series of innovative vertical marketplaces, and massive ‘Net platforms (Google, Facebook Marketplace) with ‘Buy Button’ potential. We view sentiment around EBAY as now mixed (vs. negative previously),” Mahaney concludes, hoping to see indications of “solid, sustainable” revenue and EPS growth before he intends to become constructive on EBAY shares once again.
TipRanks analytics demonstrate EBAY as a Buy. Based on 24 analysts polled in the last 3 months, 10 rate a Buy on EBAY, 12 maintain a Hold, while 2 issue a Sell. The consensus price target stands at $32.40, marking a nearly 2% upside from where the stock is currently trading.